Fallen Angel (Investors) Taking Fewer Flights
If you’re an entrepreneur looking for seed and start-up capital, this is not a good time to be counting on a guardian angel to give you a boost, according to a new report. The angels have fallen.
Angel investors , wealthy individuals who provide capital for a business start-ups, committed fewer dollars in the first half of 2010, sending seed and startup investing to its lowest level in several years, according to the Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire (UNH). This trend could soon have an impact on new ventures and job creation.
The angel funding was also spread over more deals, which resulted in a 9 percent decline in deal size for the first and second quarters of 2010 compared with 2009. Total investments in the first half of 2010 were $8.5 billion, a decrease or 6.5 percent over the comparable period in 2009.
“These data indicate that while angels remain committed to this investment class, they do so with a cautious approach to investing,” said Jeffrey Sohl, director of the UNH Center for Venture Research. “Angels are committing fewer dollars in more deals, a result of the lower valuations.”
According to Sohl, angels have decreased their appetite for seed and start-up investing , with 26 percent of first quarter and second quarter 2010 angel investment in this stage of the investment cycle, marking a steady decrease in the seed and start-up stage that began in 2208 (45 percent) and 2009 (35 percent.
“Historically, angels have been the major source of seed and start-up capital for entrepreneurs, and the declining interest in seed and start-up capital represents a significant change in the angel market,” Sohl said. “Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation.
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